KKR, Fubon among bidders for Morgan Stanley's CICC stake
Thursday, 3 December 2009
HONG KONG, Dec 2 (Reuters): Kohlberg Kravis Roberts & Co and Fubon Financial are among the bidders for Morgan Stanley's stake in Chinese investment bank CICC, people familiar with the matter said Wednesday, in a deal that could be worth more than $1 billion.
Fubon, Taiwan's No 5 financial conglomerate, has made no secret about its intention to grow into China, especially now that cross-straits relations are thawing.
When CICC was founded around 14 years ago, Morgan Stanley paid just $37 million for a 34.3-per cent piece of the Chinese bank. CICC is now one of the biggest and most successful investment banks in China, led by Levin Zhu, the son of China's influential former Premier Zhu Rongji.
While the stake has been profitable for Morgan Stanley, the New York bank lacks control of management decisions at CICC.
In December 2007, Morgan Stanley signed an agreement with China Fortune Securities, in an effort to attain a Chinese joint venture that gave it more control over management.
Beijing bars foreign firms from having more than one investment banking venture and limits their holdings to a third of the total. Morgan Stanley's ability to move ahead with the China Fortune deal has been held up by its failure so far to sell the CICC stake.
Other private equity firms that have joined the bidding include Bain Capital and General Atlantic, sources said. Two other buyout firms, TPG and JC Flowers, had also expressed interest in the stake.
Bain Capital's Jonathan Zhu, one of the firm's managing directors in Hong Kong, is a former top banker for Morgan Stanley in Asia.
Morgan Stanley, KKR KKR.UL and Fubon declined to comment. The other private equity firms have declined to comment. The sources have asked not to be identified because they are not allowed to speak on the record about the deal.
Any deal is likely to take several months, as the buyer of the stake in the government-backed bank would have to meet Beijing's approval.
For Fubon, the purchase of a CICC stake would increase its footprint in China. Its subsidiary, Fubon Bank (Hong Kong), owns a 19.99-per cent stake in China's Xiamen Commercial Bank.
Fubon, Taiwan's No 5 financial conglomerate, has made no secret about its intention to grow into China, especially now that cross-straits relations are thawing.
When CICC was founded around 14 years ago, Morgan Stanley paid just $37 million for a 34.3-per cent piece of the Chinese bank. CICC is now one of the biggest and most successful investment banks in China, led by Levin Zhu, the son of China's influential former Premier Zhu Rongji.
While the stake has been profitable for Morgan Stanley, the New York bank lacks control of management decisions at CICC.
In December 2007, Morgan Stanley signed an agreement with China Fortune Securities, in an effort to attain a Chinese joint venture that gave it more control over management.
Beijing bars foreign firms from having more than one investment banking venture and limits their holdings to a third of the total. Morgan Stanley's ability to move ahead with the China Fortune deal has been held up by its failure so far to sell the CICC stake.
Other private equity firms that have joined the bidding include Bain Capital and General Atlantic, sources said. Two other buyout firms, TPG and JC Flowers, had also expressed interest in the stake.
Bain Capital's Jonathan Zhu, one of the firm's managing directors in Hong Kong, is a former top banker for Morgan Stanley in Asia.
Morgan Stanley, KKR KKR.UL and Fubon declined to comment. The other private equity firms have declined to comment. The sources have asked not to be identified because they are not allowed to speak on the record about the deal.
Any deal is likely to take several months, as the buyer of the stake in the government-backed bank would have to meet Beijing's approval.
For Fubon, the purchase of a CICC stake would increase its footprint in China. Its subsidiary, Fubon Bank (Hong Kong), owns a 19.99-per cent stake in China's Xiamen Commercial Bank.